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Volvo lays off 2,700 workers, in sale talks with China's SAIC

Volvo lays off 2,700 workers, in sale talks with China's SAIC

Nelson Ireson

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Sale preparations at Volvo are requiring tough action to cut costs

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Labor negotiations between Volvo and Sweden's auto worker union have come to a close today, resulting in the termination of 2,721 emloyees, the vast majority of which are blue collar workers. The layoffs come as Ford has engaged Shanghai Automotive Industry Corporation (SAIC) in talks to buy the brand, according to latest reports.

Ford has revealed that the company is in talks with a Chinese company for the purchase, though it hasn't confirmed SAIC as the suitor. SAIC's recent bid to revive the British MG marque in the UK and Europe shows its eagerness to get a toehold in the west. While the models and brand name of MG could be useful in such a bid, the Volvo brand and product lineup would be infinitely more so.

Talks at mid-year between SAIC and Ford fell through, reports the UK's Mail, though SAIC denied any talks at the time. In addition to securing a European, and even U.S., market entry for China's SAIC, the sale of Volvo would show the U.S. Congress that Ford is taking its current financial situation very seriously, and is raising cash any way it can.

Talks in Congress are currently ongoing, but the expected outcome for near-term financial aid to the Detroit 3 carmakers is a $17 billion loan package. Though rivals General Motors and Chrysler appear to be in desperate need of immediate cash, Ford is in a somewhat stronger position, requesting only that funds be made available - it hopes its financial plan will prevent it from having to draw on them at all.

Several other companies are also believed to be involved in talks with Ford over the Volvo brand, though specifics are thus far not forthcoming.

The layoffs taking place in Sweden will begin immediately, with the majority released by the end of the year. "Today is of course a very sad day at Volvo, but I feel satisfied with the fact that our cost reduction program has been successful and it has enabled us to stay with a lower number of redundancies", says Stephen Odell, President and CEO of Volvo Car Corporation. An additional 680 workers outside of Sweden and 1,215 contract consultants have been released as well.